When is it really justifiable to ignore explanatory variable endogeneity in a regression model?

Jan Kiviet

Economics Letters, 2016, vol. 145, issue C, 192-195

Abstract: A procedure that aims to pinpoint the sensitivity of ordinary least-squares based inferences regarding the degree of endogeneity of some regressors has been put forward in Ashley and Parmeter (2015a). Here it is demonstrated that this procedure is based on an incorrect and systematically too optimistic asymptotic approximation to the variance of inconsistent least-squares. Therefore, and because the suggested sensitivity findings pertain to a random set of estimated endogeneity correlations, the claimed significance levels are misleading. For a very basic one coefficient model it is demonstrated why much more sophisticated asymptotic expansions under a stricter set of assumptions are required. This enables to replace some of the flawed earlier sensitivity analysis results for an empirical growth model by asymptotically valid findings.

Keywords: Sensitivity analysis; Simultaneity; Asymptotic expansions; Least-squares; Growth regression (search for similar items in EconPapers)
JEL-codes: C13 C2 O5 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176516302257
Full text for ScienceDirect subscribers only

Related works:
Working Paper: When is it really justifiable to ignore explanatory variable endogeneity in a regression model? (2016)
Working Paper: When is it really justifiable to ignore explanatory variable endogeneity in a regression model? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:145:y:2016:i:c:p:192-195

DOI: 10.1016/j.econlet.2016.06.021

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().